The 7 Deadly Sins -- of Investing

Most of us are familiar with the concept of the seven deadly sins -- though we may not be able to come up with all of them off the top of our heads. They have roots going back to ancient Greece and Rome, and the list we know now comes from Pope Gregory I, reportedly in the year 590. The sins he listed were: pride, envy, wrath, gluttony, lust, sloth, and greed. Interestingly, there is also a list of seven virtues, with each one linked to a sin.

They can all be related to investing, so here's a look at seven investing sins to avoid and seven investing virtues to aim for -- plus a few extra sins.

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It's easy to spot pride in investing -- it can come across as boasting about a terrific gain you reaped from a wonderful stock, but it can also simply be overconfidence. Many investors have been hurt by just assuming that they are very smart and above average when it comes to investing. That can lead to them doing insufficient research into portfolio candidates or to their assuming that a candidate has a very rosy future when it doesn't.

A virtue at the opposite end of the spectrum from pride is humility. Humility can help you become a better investor, because if you recognize that you're not as smart an investor as you'd like to be, you may be more likely to read and learn more. For the many millions of investors who might admit to themselves that they're not outperforming the overall market with their investments, they might humbly just accept that they'd be better off moving much of their money into one or more low-cost index funds, because it's really hard to beat index funds when it comes to simplicity and performance.

ALSO READ: 3 Reasons to Invest in Index Funds

Greed may be the sin most clearly tied to investing. It's very easy to get greedy when it seems like a soaring stock market will keep lots of stocks soaring for a long time. Many times, though, that's not what happens. There will always be occasional stock market corrections and crashes. Remember Warren Buffett's famous bit of advice -- to be greedy when most investors are fearful (i.e., buy when stock prices have fallen) and be fearful when most investors are being greedy (i.e., be wary of overpriced stocks).

An opposing trait to greed is charity. This can take several forms. For starters, remember to be humble, recognizing that some or much of your success may be due to your having had good teachers and good luck -- and to having won the "ovarian lottery," as Warren Buffett puts it -- having been born at a good time in a good place. Many people don't have those tailwinds, so consider sharing some of your good fortune. To reflect this virtue, you might donate to charities, and you might also develop a generous way of being. Being ready and willing to help others above and below you can help you get ahead at your job, too.

ALSO READ: Why Smart Bosses' Default Choice Is Generosity

How does lust relate to investing? Well, we can, in a sense, lust after certain stocks -- perhaps when they seem to have one or more of the attributes we seek: very rapid growth rates, steep dividend yields, and so on. Such lust might have us acting quickly and snapping up shares before digging more deeply into the company, where we might discover that its growth rate might slow soon, due to supply chain issues hampering production, or that its steep yield is a result of its stock having fallen due to serious problems.

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Chastity is a virtue that opposes lust. In an investing sense, you might define it as refraining, or abstaining, from engaging in stock lust. If you find yourself drooling over a stock you saw someone raving about online or on TV, take some time to study it further. Don't chase high-flying stocks until you've assessed their price and determined that they're undervalued or at least reasonably valued.

ALSO READ: Value vs. Growth Investing: Which Should You Buy?

It's super easy to be envious when you're an investor. You might, for example, see that a certain stock has averaged annual gains of 30% over a decade or two and be very envious of those who were early investors in it. Or you might see people with portfolios worth 10 times what your portfolio is worth, or people with much fatter incomes than you have, who have more money to invest. Try to refrain from being envious, though. Remember George Will's statement that "envy is the only one of the seven deadly sins that does not give the sinner even momentary pleasure."

Cultivate gratitude in yourself as you invest. As you see your portfolio increase in value over many years, be thankful that you've been able to build reserves for your retirement. Be thankful that you have access to and the ability to buy small portions of wonderful businesses in the United States and abroad, and to share in their growth and prosperity.

Gluttony comes easily to many investors. If you spend a day reading articles at Fool.com or elsewhere, you'll come across gobs of stocks that you might suddenly find yourself wanting to buy. You might even do so, buying tiny positions in lots of stocks. That can work out fine, but it might be more effective to study them all more and choose the few that you're most bullish on, parking your hard-earned dollars in your most promising ideas. Remember that you don't have to be invested in every terrific stock. There are many great stocks, and you really only need a few outstanding performers in order to have a solidly performing portfolio.

ALSO READ: 3 Undervalued Stocks to Buy in the Second Half of 2022

Next up is the virtue of temperance, which opposes gluttony. If you exhibit temperance, you'll abstain from wanting to buy (or actually buying) gobs of stocks wantonly. Instead, you'll be more discriminating, focusing your dollars and attention on the most compelling opportunities you run across. You also won't feel the need to keep buying, being satisfied with the wonderful portfolio you've assembled and aiming to hang on to many or most of your holdings for a long time.

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In your investing life, you may occasionally feel anger, or wrath. You might be angry if the market or a stock tanks just after you buy into it. You might be angry at yourself if you missed out on buying a stock just before it soared. Try to take a deep breath and let such feelings go. It's inevitable that the market will drop sometimes, but it has always gone on to recover and hit new highs after doing so. It's inevitable that you'll make some bad calls now and then -- or that you'll be a victim of bad timing.

Patience is a critical virtue to cultivate if you want to be a successful investor. Think about some of the most amazing long-term stock performances over the past decades -- stocks such as Starbucks, Costco, Amazon.com, and so on. They've made many investors lots of money -- especially for the investors who hung on through thick and thin over many years -- despite occasional downturns and occasional stretches of little movement in the stock. These and other great performers haven't grown phenomenally in value in a straight line.

ALSO READ: Why Patience Is the Most Important Factor in Successful Investing

Sloth is a funny deadly sin of investing, because it's actually both a sin and a virtue. It's a sin if you keep putting off starting to invest, losing many years of appreciation you might have enjoyed, and if you're too lazy to research the stocks you buy into and too slothful to spend time reading and learning more about how to be a better investor. On the other hand, if you're investing well, you do want to have an element of sloth in you. Once you have a portfolio of wonderful businesses, aim to leave them alone to grow. To do so, you'll need to spend a lot of time doing nothing.

Finally, here's the last virtue that opposes one of the seven deadly sins -- diligence, which can be thought of as the opposite of sloth. Diligent investors are likely to do well, because they do their due diligence before investing in anything. If they're seeking a good index fund, they look for low fees and appropriate indexes to track. If they're seeking a great stock in which to invest, they look for lots of promising factors, such as sustainable competitive advantages, robust profit margins and growth rates, little or no debt, and so on.

ALSO READ: 9 Best Index Funds for Long-Term Investors

Those are the seven deadly sins -- and their seven opposing virtues. Over the years, many have suggested other sins that might be added to the list, such as idolatry, willful ignorance, and fear. These, too, can apply to investing. We often idolize certain investors, assuming they can do no wrong, when each of them is human and subject to error. We sometimes choose to remain ignorant instead of learning more or considering opposing points of view, which can keep us from getting better at investing. And sometimes, we succumb to fear and just don't invest.

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We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Each of us makes investing decisions all the time: It might be deciding whether to read a certain investing book or article or not; whether to invest in this stock, bond, or fund, or not; whether to sell or not; and so on. In most cases, there will be a good thing to do and a bad thing to do. Do the good thing. Cultivate investing virtues and try to avoid investing sins.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Selena Maranjian has positions in Amazon, Costco Wholesale, and Starbucks. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, and Starbucks. The Motley Fool recommends the following options: short October 2022 $85 calls on Starbucks. The Motley Fool has a disclosure policy.